Feds put up $12M for Ont. frozen pizza plant

The Canadian arm of German food processing firm Dr. Oetker has picked up $12 million in federal "repayable contributions" for a new frozen pizza plant to be built in southern Ontario.

Dr. Oetker, whose Canadian holdings include the Shirriff mashed potato, pudding and pie filling brand and the Added Touch line of baking mixes, picked London last July as the site for an $113 million investment to build its first North American frozen pizza manufacturing and warehouse facility.

The London plant, expected to open by early 2014, is expected to help Dr. Oetker produce up to 50 million frozen pizzas per year for the Canadian and U.S markets and "source high-quality ingredients such as cheese, flour, meats and tomato sauce from Ontario farmers and food processors," the company said in a release Thursday.

Dr. Oetker estimated the new plant, when operational, will source about 11 million kg of ingredients and over five million kg of packaging per year.

"The London facility will produce our Ristorante and Casa di Mama pizzas, as well as our newest product, Panebello pizza," Christian von Twickel, executive vice-president of Dr. Oetker Canada, said in the company’s release.

The company said its Canadian unit, based at Mississauga, Ont., already has about 120 employees and produces over 300 products, and has doubled in size over the last five years through new product development.

However, Dr. Oetker, which in Canada now claims about a one-third share of the frozen pizza market, today imports those pizzas. Once the London plant is operating, the company expects to "significantly reduce its carbon footprint" by eliminating overseas shipments equal to about 75,000 pizzas per day.

Impact

The bulk of the federal funding pledged Thursday will flow through FedDev Ontario, the federal economic development agency for southern Ontario.

The agency will put up $10 million for Dr. Oetker to buy equipment and hire engineering, planning and project management contractors to build the plant.

The FedDev funding comes from the agency’s Prosperity Initiative, from which for-profit corporations such as Dr. Oetker can only apply for repayable funding.

Agriculture and Agri-Food Canada, meanwhile, will put up repayable funding of $2 million, the maximum available through its AgriProcessing Initiative (API), for Dr. Oetker to buy equipment such as ovens, freezers and machinery for making toppings, preparing dough and packaging.

The API requires all projects receiving funding to be completed by the end of March 2014.

The plant, when operating, is expected to create 120 permanent jobs.

"Overall, these investments will ensure the company becomes more competitive in the North American market," the federal government said Thursday.

"Direct subsidy"

The association representing Canada’s pizzerias and other restaurants, however, takes a different view of the federal support for the plant.

"Our members are deeply troubled that your government is using tax dollars, paid by our members, as a direct subsidy to their competitors who threaten their market share and ongoing businesses’ viability," Garth Whyte, CEO of the Canadian Restaurant and Foodservices Association, wrote in a letter Thursday to Agriculture Minister Gerry Ritz.

The FedDev and API funds, he wrote, are piled "on top of the $7 million subsidy this same pizza manufacturer received from the government of Ontario last year."

Reiterating a long-standing CRFA complaint, Whyte added that Canada’s supply management system for dairy products sets up a "two-tiered pricing system" for pizza cheeses. "The restaurant industry’s fresh pizza makers are forced to pay about 30 per cent more for the very same cheese as frozen pizza operators."

Frozen pizza makers have had access to "significantly cheaper-priced" mozzarella under the special category 5A class since 1989, while "restaurants have struggled to compete with lower-cost frozen pizza products," Whyte wrote.

"To add insult to injury, frozen pizza manufacturers get a second break as their products escape HST at retail stores, which gives them a double price advantage."

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